The EU’s chief Brexit negotiator rejected proposals for new customs arrangements after the UK leaves

Michel Barnier also made clear that Brussels still has reservations about Mrs May’s proposed ‘backstop’ arrangement for the Irish border (Niall Carson/PA)

The EU’s chief Brexit negotiator has blown a hole in Theresa May’s Chequers plan by flatly rejecting a key element of her proposals for future relations following UK withdrawal.

Central to the British Prime Minister’s plan, set out in a white paper a fortnight ago, is a “facilitated customs arrangement” under which tariffs charged at the border would be passed on to either the British or EU authorities depending on the destination of imported goods.

Appearing alongside new Brexit Secretary Dominic Raab following their second round of talks in Brussels, Michel Barnier left no doubt that this was not acceptable to the EU.

“The EU cannot and the EU will not delegate the application of its customs policy and rules and VAT and excises duty collection to a non-member who would not be subject to the EU’s governance structures,” he said.

Anti-Brexit campaigners seized on the comments as proof Mrs May’s exit strategy is “dead” and described the press conference as a “drive-by”.

Mr Raab signalled that he is looking for compromise from Brussels in response to Mrs May’s white paper, noting that the EU was able to take an “innovative” approach “when the political will has been there”.

He added: “With ambition and pragmatism and energy on all sides, we can get there in October.”

And he appeared to be making an attempt to separate the thorny issue of the Irish border from the rest of the Withdrawal Agreement which is due to be settled by October, repeatedly referring to a “protocol” on Northern Ireland.

The EU negotiator bluntly rebuffed Mr Raab’s suggestion that the UK might tear up its promise to pay a £39 billion “divorce bill” unless it got a good deal on future trade.

Mr Barnier told him that, while the commitment to a financial settlement made by Mrs May in December was not yet in its final legal form, the 27 remaining EU members and European Parliament regard it as “agreed for good”.

He also made clear that Brussels still has reservations about Mrs May’s proposed “backstop” arrangement for the Irish border, which would see the whole UK matching EU trade tariffs for a period if a trade deal is not reached by 2021.

“We have no objection in principle to this but we have doubts that it can be done without putting at risk the integrity of our customs union or commercial policy or regulatory policy,” said Mr Barnier.

The Chequers agreement has been studied “carefully” and there are some areas of “common ground”, he said.

“There are other points on which we have a problem because they contradict, they clash with, the European Council guidelines,” Mr Barnier added.

“They contradict my clear negotiating guidelines. Indivisibility of the four freedoms, the integrity of the single market, these are key points.

“This is our main asset. We are not going to negotiate on that. The United Kingdom has known that from the outset.”

“We are clear that our proposals respect the core principles of the EU.

And we have considered the innovative approaches the EU has taken in the past with other third countries – when the political will has been present.” – Secretary of State @DominicRaabpic.twitter.com/n7dj4L2yyH

Labour former Cabinet minister Ben Bradshaw, a supporter of the People’s Vote campaign for a fresh referendum, said: “The white paper is dead. It has expired. It has ceased to be. It has gone to join the choir invisible.

“Once again the chaos and confusion at the heart of Brexit is exposed. Mrs May’s scheme could not command a majority in the Commons two weeks ago when she allowed the Brextremists to mutilate it.

“Now we know that hardly mattered because it was not acceptable to the EU in any case.”